Insurance innovation: Health cover portability

MUMBAI: Health insurance market has become competitive following the introduction of portability which allows customers to switch companies without losing their "no-claim" benefits. Although prices have not come down, companies are offering better features.

The latest is a health policy by Apollo Munich where the sum insured is reinstated in full after a claim. Under the health plan "Optima Restore", if the policyholder uses up the sum insured for any ailment, the sum insured will continue to be available for any new ailment.

Earlier in October, L& Insurance had launched a new plan that reinstated the sum insured if the policyholder had an accident. Apollo Munich has extended the reinstatement for all ailments and is also offering the feature on a family floater plan. Family floater plans are covers where the same sum insured is available for all members. Under "Optima Restore" even if a family member uses up the sum insured the cover is once again reinstated after the claim. Also for those who do not claim, the sum insured will double in two years under a multiplier scheme. Other insurers such as Bajaj Allianz General Insurance are using direct marketing to sell policies through the internet.

Until now, it was largely property covers like fire insurance that had a reinstatement clause. This allowed for the sum insured to be restored and the cover to continue for the rest of the year for any subsequent claim. According to Antony Jacob, CEO, Apollo Munich Health, despite the additional benefits the price has been kept competitive compared to plans of companies that do not the reinstatement option. He said the company every month sees around 1,000 policyholders from other companies choosing to shift to Apollo Munich.

Besides the introduction of portability, innovation in health insurance is being driven by monoline companies like Apollo Munich that specialize only in health insurance. Other specialist companies include Star Health and Allied Insurance and Max Bupa Health. More recently, Cigna has entered into a tie-up with TTK Group to provide health insurance in India.

IRDA wants lifelong renewal for health covers

The insurance regulator has told insurance companies that when they design new health plans there should not be a maximum age for existing policyholders. Companies will continue to have the freedom to set an age limit for entry - that is for buying the policy for the first time. But once they have issued apolicy, they will be obliged to continue renewing it during the life time of the policyholder.

Most health plans in the past have had a maximum age limit. The plans that were introduced earlier with a maximum age limit will continue to be sold as the pricing was based on the earlier design.

"Our health policies were life long renewable even without the regulator insisting on this feature," said Antony Jacob, CEO, Apollo Munich Health Insurance. Insurance officials said that lifelong renewal would require a re-look at pricing because their claims experience at the higher age bracket of 85 and above was more than 100%.

Secondly, health insurance penetration has picked up only in recent years and insurance companies do not have enough experience of morbidity at higher age groups. According to Jacob, unlike life insurance it is not possible to have flat premium rate over the years because the cost of treatment keeps rising because of medical inflation.